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Milestones : Buenos Aires Opens Global Swap

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Nearly four years after its default, the Argentine province of Buenos Aires opened a global debt swap in November that analysts predict will prompt bondholders to tender as much as 85% of defaulted debt when the offer expires on December 16. The deal follows the record-setting $100 billion sovereign restructure that was both the largest in history and one of the most contentious.

Instead of the federal government’s prolonged battle with creditors, provincial authorities have maintained an ongoing dialogue with bondholders who support the offer. The province is offering a haircut of about 52%, versus the Republic’s 60%. The province’s restructure is considerably smaller at $3.1 billion and involves 16 types of bonds set to mature between 2002 and 2007, at rates as high as 12%.

But, like the Republic, provincial authorities warn holdouts that there will be no improved offer once the deal expires. “We are not going to make another offer,” Buenos Aires’ economy minister Gerardo Otero told the press. “There is no Plan B.” The province’s timeline calls for completing the swap in mid-January.

Under the swap, the province offers up to $750 million of 15-year par bonds due in 2020 and denominated in euros or dollars, paying 1%-4% annually in a step-up scheme. It also offers up to $500 million of 12-year discount bonds due in 2017 and which pay a fixed rate of 9.25% for dollar-denominated paper and 8.5% for euro-denominated bonds. A third option involves 30-year pars in euros or dollars, paying 2%-4% annually.